Freehold Purchase – What is a house?

A recently decided case, Jewelcraft Ltd v Pressland [2015], has confirmed that a shop with accommodation above does not necessarily fall outside the definition of a house, just because it is described as a shop.

Section 2(1) of the Leasehold Reform Act 1967 defines a house in relation to a tenant’s right of enfranchisement. The section provides that a house ‘includes any building designed or adapted for living in and reasonably so called, notwithstanding that the building is not structurally detached, or was or is not solely designed or adapted for living in’.

In Jewelcraft, the claimant was the tenant of a building comprising a ground floor purpose built shop with residential accommodation on the first floor above. Originally the shop was not self-contained and could be accessed from the flat above. The two floors were separated in the 1970’s.

The building was part of a parade of similar shops built in the 1920’s each with a 99 year lease running from 1921. The building had been sublet to a newsagent from 1978 on successive underleases, with the accommodation above occupied by its employee(s) under a service occupancy agreement.

The tenant’s claim to enfranchise under the Act was rejected by the County Court on the basis that the building did not constitute a house under section 2(1) of the Act. The judge stated that the building was not a house because it did not look like a house and was part of a parade of shops with residential accommodation above.

The Court of Appeal, however, disagreed with this approach on the basis that it was inconsistent with previous cases.  Further, in the Court’s view, the wording in section 2(1) of the Act clearly indicated that it was not Parliament’s intention to exclude the right of enfranchisement for buildings that were designed or adapted in part for non-residential use.

On a practical point, Jewelcraft demonstrates that corporate tenants may be able to use enfranchisement rights to acquire freeholds of premises which are partly used for business.

For advice on this, or any other residential leasehold matter,  please contact Robert Plant who heads up our team of leasehold experts